AGL’s use of ‘huge’ market clout costs consumers $3b a year: report

“It’s huge,” Dr Mountain told The Sydney Morning Herald and The Age. “There’s no doubt this market’s not working.”

‘Vindication’

Mr Taylor said the report was “a vindication of what we’ve been saying for a long time”.

“This is unacceptable behaviour,” he told reporters. “Twelve times Labor has refused to support this legislation … and sat on the side of the big energy companies.”

AGL disputed the claims, saying despite recent reviews of the sector by the Australian Competition and Consumer Commission (ACCC) and the Australian Energy Regulator (AER), it had not been accused of misusing its market power.

The researchers say they did what regulators haven’t done – examine how coal-fired generators responded to a “step change” in electricity prices that has barely subsided since the end of 2016.

Coal-fired power generators collected about $3.47 billion more from the higher spot revenues in the year following the Hazelwood-led price jump, they found. Those prices have eased slightly but are still running about $3 billion more annually than if market prices pre-Hazelwood had prevailed.

“The Australian Competition and Consumer Commission says the market is not working effectively but didn’t do a specific analysis of individual generators,” Dr Mountain said. “They didn’t figure out who to point the finger at – whether they were all complicit or one was – and they didn’t estimate the size of the detriment.”

While the other giants, EnergyAustralia and Origin, were also slow to adjust output as prices rose and had their profits buoyed too, the reasons for their delay were more plausible than AGL’s, Dr Mountain said.

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AGL’s 2640-megawatt Bayswater power station cut overnight output and during the middle of the day in 2017. While it offered more regular power in 2018, it did so at about 300MW less than it had in 2016, the report said.

AGL said it had sent the ACCC and AER thousands of company documents during recent lengthy reviews of the sector.

“Neither regulator has accused AGL of misusing market power, or behaving in a way that’s within the rules but harmful for the market,” a spokesman said.

‘Market power’

ACCC chairman Rod Sims said after Hazelwood closed, remaining coal-fired plants had “basically doubled the price they were offering energy to the market”.

“Someone had a lot of generation capacity, knew that it had to be dispatched, and bid accordingly,” Mr Sims told The Sydney Morning Herald and The Age.

“It’s irritating and it has caused energy consumers to pay a lot more for their power, but it’s not illegal,” he said, noting the ACCC had gone to court to stop the sale of Liddell and Bayswater to AGL. “They’ve taken advantage of their market power.”

Dylan McConnell, an energy researcher at Melbourne University, said while the size of the economic impact would need closer analysis, it was “self-evident” that market power had been exercised by AGL.

“The AER haven’t been the most pro-active regulator,” Mr McConnell said. “Why didn’t they look at AGL more closely?”

Consumer hit

Kerry Tanner, an EnergyAustralia customer, said she had seen her quarterly power bills double in the last 18 months or so, to almost $2400.

This is unacceptable behaviour and 12 times Labor has refused to support this legislation.

Federal Energy Minister Angus Taylor

The extra hit was “so unaffordable” and meant her family had to scramble to pay for other expenses, such as paying for her daughter’s braces.

The family didn’t “have a second freezer or fridge” and “barely use the air-con because we can’t afford it”, Ms Tanner said.

“I am paying nearly $10,000 on electricity a year,” the resident of Buxton, to Sydney’s south, said. “I’m not the only one struggling with this – others are losing their homes as the increase of energy costs on top of mortgage repayments is making it harder to stay on top on things.”

Labor view

Mark Butler, Labor’s energy spokesman, said the Liberals’ “complete lack of energy policy meant that when Hazelwood closed, there was no plan for replacement generation or to support workers and the community”.

“It’s the Liberals’ inability to resolve their energy crisis, which has resulted in power prices going up, and up and up,” he said. The government’s “big stick” energy policy wasn’t “in the interest of consumers, if it was the ACCC would have recommended it in their report”.

Comment has been sought from the AER and NSW Energy Minister Don Harwin.

Dr Mountain said a range of options were available to rein in AGL and other big players. These included a break-up of the three so-called “gentailers”, forced divestment by AGL, or even a royal commission.